The New Federal Rule That Swings Back At Unfair Appraisals

There is a new Federal rule that will help homeowners understand the complicated process of the appraisal in their home buying procedure. The new rule will allow the buyers time to question or challenge the appraisal they are given, if they feel there might be mistakes or errors in that appraisal.

Starting January 18, 2014, lenders all over the nation will have to tell the mortgage applicant(s) that they will get a free copy of all appraisals and all the information that was used (from all sources) to come up with the value on their appraisal. The buyer(s) will be able to see all the information used in a much quicker time frame or three days before the loan will close (whatever is the fastest)…The lender must tell you about the new rule and your rights within three business days after they receive your completed mortgage application and all appropriate documentation.

Previously, as a buyer, you were not provided a copy of the appraisal (generally), unless you requested it…Now, any and all the information that was used (no matter where it came from or who it came from) in coming up with the appraisal price must be shared with the buyer(s).

These changes came from changes to the Equal Credit Opportunity Act made by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  This will only apply to first mortgages/liens on properties. It does not apply to second mortgages, equity lines of credit, etc.

If you get an appraisal that you and/or your real estate agent feel is not right or incorrect, you will now be able to see all the information that was used to come up with this evaluation, and can determine if correct “comparables” were used and if were any mistakes in the information on those comps…

I refinanced my home a while back, and the appraisal was not appropriate...After I requested a copy, I noticed several thingsThe appraiser had forgotten a full bath in the basement. He had used several comps that were correct, but the square footage listed on the MLS sheets included the finished walkout basement square footage (which is not allowed in the square footage section)…I, too, had a finished walkout basement, but he had “shorted” my square footage by over 2000 square feet…Quite a difference in value on an appraisal…With those mistakes and a couple of others that could be substantiated, I did get a corrected appraisal which worked out fine…

This new change should help everyone to get a correct and up-to-date appraisal. I have always found that good appraisers do a fantastic job and are very careful on all the details…I spent over an hour with one appraiser recently on one of my listings, who not only measured all the interiors of the walk in closets, but even had me “hold him up” to measure a huge bay area with a large whirlpool tub, as trying to balance was very “iffy!” He was excellent and spent the time to make sure he had all the information and details correct…

I think this new rule/law will help all concerned in the real estate, mortgage, appraisal business and the buyers and sellers…I believe it will elevate the level of using qualified, knowledgeable appraisers from the area(s) that they are appraising. I do not think an “automated valuation” or broker price opinion (BPO) can match the expertise of a trained appraiser familiar with the area that the home is located in. I have an appraiser that I call with questions when coming up with a listing price, if there are things that are special or detrimental to the property–siding to a busy road, etc., fantastic one-of-kind upgrades, or something that would be out-of-the-ordinary for the area…He usually can help me determine what that would mean to an appraisal value…His expertise is invaluable to me and to my clients.

I am sure, just as in the real estate field, and any other fields (CPA’S, doctors, etc.) change happens quit readily, and it is hard to keep up…That is why “continuing education” is a fabulous thing–(although when I go, I always leave much smarter, but a little scared!) I have met tons of appraisers and most have been excellent—high level of effort, expertise, experience, and accuracy on their “knowing the standards, current trends and values.”

There is one other section of the rule that lets you waive your right to get your appraisal earlier, when completed, or to receive it at the closing table…I would hope that everyone would take the time to understand all the implications of home buying—mortgages, inspections, attorney review, ability to get comparables (solds for the last 6 months) before writing an offer on any home. It is very important to take your time to ask questions and understand everything before you make a monumental decision such as buying or selling your home…

An informed consumer is a wise consumer…And, you can never be too wise!




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